As a trend investor, I try and hold on to things that are working and short things that are not.  For the past 2 mos that was going long energy and going short financials.

My how things change over 3 days.

We have Chesapeake Energy down $20 straight the past 2 weeks.  Bank of America up 10 points in 3 days (or nearly 40%).  Wells Fargo almost exactly the same.  Lehman Bros up 8 pts during that period.  And Blackrock up $58 in 3 days.  BankUnited up 7 fold in 3 days.

Okay some of these stocks needed to correct...energy was too hot and financials were too cold.  But 30-50% moves in 2-3 days on megacap companies is something that is not supposed to happen.  These stocks are beginning to behave like penny stocks.  It makes it very difficult for swing traders like myself to get in and out of these moves.

I lost a ton of money on Syngenta (which I think is behaving horribly), Seagate (was trapped by value that I saw) and lost profits I had on Chesapeake, my puts on HSBC and sold Baytex for much less than what it used to be.  I took profits and tried not to be a pig, but withstanding 30-50% moves in one week is awfully tough to do.  You just cannot prepare for that. 

As far as I know the housing crunch was not solved when the SEC put in its rules against naked short selling and when Paulson announced backstop financing for Fannie and Freddie.  This ended up being the 3rd govt bailout (January with the emergency 75 basis pt cut, March with bailout of Bear Stearns and July).

Each time we've only gone lower after the crazy short covering rallies that ensued and the problem wasn't solved.

So where do you invest your money now?  Financials...are tough as they've become nothing more than a trade, and do you want to chase after a 30-50% rally?  Technology...do you want to invest in a sector that is just beaten down senselessly and continues to get killed with each earnings report?  Energy...do you want to catch a falling knife when everyone talks about oil going back down to $80 (after saying it was going to $200 a month ago)?  Emerging Markets...do you want to invest in markets with double digit inflation?  

So what is working?  Infrastructure and Engineering, aside from the bad news from Chicago Bridge & Iron...stocks like Foster Wheeler, Jacobs Engineering, Shaw Group and Fluor will continue to work.  Oil Services (not drilling) if you have a longer term horizon stocks like Schlumberger, Haliburton, National Oilwell Varco, Transocean, Baker Hughes and FTI Technologies continue to work as their business is locked up for years and oil prices being anywhere from $80 and higher will be just fine.  Electronic Controls...stocks like Amphenol, ABB Ltd, Energy Conversion Devices, Hexcel and GrafTech to name a few.  Specialty Chemicals like RPM, Sherwin Williams and PPG have came to life with Dow Chemical's takeover of Rohm & Haas.  Lastly healthcare (minus health insurance) is doing great.  Whether you look at equipment companies like Illumina and Intutitive Surgical or biotech companies like Genentech and Gilead or pharma companies like Wyeth, Schering Plough and Novartis or diagnostic companies like Labcorp and Quest...they all work.

The two other things that work is CASH and GOLD.  Anybody who had monies in those this year instead of stocks and mutual funds...outperformed 90% of the market professionals.  

I've been humbled once again by this market and will try once more to try things that are working. Apple and Bank of America reports on Monday...that will be very key to this market.  Good luck everyone. 

Alpha,

trends are known to be very trendy to produce untrendy trend changes so to speak.

As we are small fishes we need to understand and been able to detect when Big Boys start to unoad ( or cover ) into trend. There are many ways of doing so, none works 100% ( not even 70% ) all the time, but the more tools we use, the less opinuated we ( e.g. - financials are dead forever statement might be very true, but...who are we kidding? No financials??? O...K...), in short market as life might change on a dime.

Not to toot my horn, just as a prove of  concept - we CAN call trend changes, it is more difficult to say if that is short, medium or long term changes, but when change of trend is detected - those who plays poker know - it is time to go "all in".

Below are links to my "trend changes calls" with precision of no more than 1 week ( normally it is 3-4 days, and is case of latest financials rally - I've been expecting to see it "second week of July", when we got pop at that time, which as we agreed with MikkelFishman - good trader who is not afraid to keep his eyes open and be fast to admit mistake and reverse direction, so that "pop" felt not so  "natural", but Wednesday July 16th at 7:49Am I posted "(XLF) has had enough" and that WAS/IS(?) rally I was expecting.

Judge for yourself, I know it is more "popular" to discuss "world's problems on these blogs than talk trades and I will get slammed, because links below will be interpreted as "pumping my site" ( which is free and I don't really care if anyone reads it or not, I do it because I love it) ,  but anyhow - links are below - read and judge for yourself if one can call trend changes in a timely manner. ( You might wish to read more posts just to make sure that I was not calling direction changes every day for the last 100 years :-))

DavidDT

P.S. Everything IS a trade ( it ENDS sooner or later, the only difference is duration )

Trailing stops work quite well. Profits realized with a set it and forget it attitude. If the stock is diving, add to the position if you feel appropriate and adjust the trailing stop qty and price accordingly.

It doesn't have to be as much work as some make it out to be. Even though I like to watch the action, those trailing stops keep me from doing something stop or hoping I'll catch a swing.

respectfully disagree on "trailing stops as set it and forget it"

Nothing can replace discipline and hard trailing stops ( 8-9% usually?) will shake you out on intraday swing action from otherwise highly profitable position if evaluated based on "CLOSING prices based mental stops"

There is no "set it and forget it" - anywhere.

Another danger of "trailing" - it makes you "shot for small profits" instead of "STARS" - that is where money is made as oppose to "lost"

DavidDT A.K.A. David Dumb Trader